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One of the many questions asked by entrepreneurs as they plan for the sale of their business is related to the Adjusted EBITDA definition. Its computation is important to business owners because it’s a vital part of a multi-step process used in the valuation of a privately held company.

Adjusted EBITDA is used by Business Brokers in the valuation and sale of smaller businesses often referred to as ‘Main Street Businesses’. Likewise, the concept is used by Merger & Acquisition Intermediaries or Investment Bankers when representing businesses for sale in the lower middle and middle market.

Before we define Adjusted EBITDA, understanding what this measurement means in the context of business valuation is a worthy exercise.